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12:30 - 12:45 26 November 2014

Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut

Location

IFS Basement | Institute for Fiscal Studies (link Map)
7 Ridgmount Street | London | WC1E 7AE | United Kingdom

Open to: Academic | Student
Ticketing: Open

Speaker information

Danny Yagan

Policymakers frequently propose to use capital tax reform to stimulate investment and increase labor earnings. This paper tests for such real impacts of the 2003 dividend tax cut---one of the largest reforms ever to a U.S. capital tax rate---using a quasi-experimental design and a large sample of U.S. corporate tax returns from years 1996-2008. I estimate that the tax cut caused zero change in corporate investment, with an upper bound elasticity with respect to one minus the top statutory tax rate of .08 and an upper bound effect size of .03 standard deviations. This null result is robust across specifications, samples, and investment measures. I similarly find no impact on employee compensation. The lack of detectable real effects contrasts with an immediate impact on financial payouts to shareholders.


Contact

Institute for Fiscal Studies
020 7291 4800 | -


Links

Seminar paper


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